Depreciation in Accounting

Depreciation in Accounting

Introduction

Depreciation is the decrease in value of property of a fixed asset, produced by the passage of time, wear and tear, disuse, technical failure, obsolescence or other factors of nature operational, technological, tax, etc. In other words, Loss or decrease in value of an asset due to wear, the action of time or obsolescence. Depreciation is to be separating and accumulating funds to restore a particular good that is losing value through use (Schwartzman, 2007).

Discussion

When an asset is used to generate income, this suffers from normal wear-life in the end leads him to be unusable. The income generated by the asset used, you must include the expenditure of active wear that suffered to be able to generate income, since, as according to a basic economic principle, there can be no admission without having incurred an expense, and wear an asset for its use, is one of the costs that ultimately will generate a certain income (Warren et.al, 2002).

Causes of Depreciation

There are mainly two causes for depreciation in accounting.

Wear: who suffer from the property by the passage of time only when used normally?

The depletion, which occurs in case of tangible assets acquired to be subjected to mining activities (quarries, mines, oil wells, etc.).

Non-Depreciable assets

Not all of the company assets are subjected to depreciation. Non-depreciable assets are those not subject to wear or demerit for the purpose for which they are subjected and therefore do not lose a price, at least for accounting purposes. Among non-depreciable assets are:

Land

Construction in progress

Assembly machinery

Furniture and fixtures manufacturing

The vast majority of the assets of a company are depreciable. Fixed assets of the company who have worn or wear and tear they are subjected to or by the mere passage of time, are part of the depreciable assets.

Depreciation Methods

Straight-line Method

Also known ...